Australian wine grape growers being ‘forced into insolvency’

Wine grape growers in Australia's Murray Valley have complained to the country's competition watchdog over price cuts that they claim could push many of them out of business.

Key wineries have cut grape prices by between 20% and 50% on the upcoming 2014 vintage, according to leaders of Murray Valley Winegrowers (MVW), who met with officials at the Australian Competition & Consumer Commission late last week to begin a formal complaint process against three of the country’s top wine companies, Treasury Wine Estates, Pernod Ricard and Accolade Wines.

MVW has alleged that the companies are misusing their market power.

‘All 505 Murray Valley wine grape growers are trading at well below break-even this year,’ MVW’s chief executive, Mark McKenzie, told decanter.com on the eve of the annual Australia Day tasting in the UK.

‘We are very concerned with the winery tactics on prices, which in effect will force vineyards into insolvency.’

Australian wine companies’ profits have come under significant pressure in recent years, due to exchange rate swings and slowing consumer demand overseas that have exacerbated domestic oversupply.

The country’s wine exports fell by 6% in volume in 2013 versus 2012, to 678m litres, although there was better news at the premium end of the market with export prices per litre up by 3% for bottled wine, according to Wine Australia figures.

McKenzie said, ‘We do not accept that the Australian dollar or the market fundamentals support such a slashing of prices, which in real terms takes growers back 40 years, particularly for red wine grapes which are in solid demand, and particularly in light of an emerging picture of a markedly lighter 2014 crop.’

A spokesperson for Treasury Wine Estates (TWE), which saw net profits slide by 50% in its last fiscal year and this week issued a fresh profits warning, told decanter.com, ‘Like all commodities, pricing for grapes fluctuate according to supply and demand.

‘At this early stage of the season, we’re still unclear about the size of the Australian 2014 vintage [grape] crush, so we’re understandably being cautious with our pricing and purchasing commitments.

‘However, as per previous vintages, TWE has a proven track record of monitoring the market and adjusting our prices accordingly to fulfil our demand requirements.’

A spokesperson for Accolade declined to comment on the matter. A Pernod Ricard spokesperson could not be reached ahead of publication.